tv Nightly Business Report PBS January 12, 2012 1:00am-1:30am PST
hear what this man has to say. >> any investment that we are making right now-- and this is the first time in 22 years-- any investment that we are making right now, we are looking for exposure to europe. >> reporter: i'm diane eastabrook at the north american international auto show in detroit, where ford is out to prove there is still life left in lincoln. >> tom: it's "nightly business report" for wednesday, january 11. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you.
thank you. >> tom: good evening, and thanks for joining us. susie gharib is off tonight. worries about europe today as well as corporate earnings here at home that led to a lackluster day of trading on wall street. the dow industrial slipped just 13 points, snapping a two-day winning streak. the nasdaq added eight points and the s&p 500 eked out a fractional gain. as for volume, 755 million shares moving on the big board and 1.7 billion on the nasdaq. we saw some data indicating europe's economy has slowed, and banks in europe continue to keep a record amount of money on the sidelines, not loaning it out. you may see these european worries hit the bottom lines of american companies. while earning season has just
begun, there are signs already that europe has become a serious drag. erica miller reports. >> reporter: we all have to eat and drink, so you would think demand for beverages like coca- cola would be strong in good times and bad. but wall street analysts are worried that weak demand in some european countries is taking a toll on the company's bottom line. another big headwind is the dollar's rise against the euro. >> the big impact that it has, i think, for coke, is when currency works in their favor like it did in 2011, they reinvest some of that money back behind volume growth or long term revenue growth. when it works out of their favor, they don't have that same flexibility as they otherwise would. >> reporter: that's part of the reason u.b.s. downgraded coca- cola stock from "buy" to "neutral" today. the firm has an investment banking relationship with the beverage giant. coke is far from the only big american company that could take an earnings hit from sales erosion in europe. roughly 14% of all revenues
earned by s&p 500 firms come from the region. a slew of companies in different industries have blamed europe for pressuring earnings, including tech giant texas instruments, luxury retailer tiffany and aluminum giant alcoa. the good news is that many analysts believe weakness across the pond is already factored into most u.s. stock prices. that said, investment strategist mark lamkin recommends investors take a close look at stocks they rely on for dividend payments. >> don't chase yield in dividend payers. i think your highest paying dividend yielders, if they have europe exposure, those dividends are going to get cut. so, look for good multinational companies that don't have huge exposure in europe, pay a modest dividend. those dividend will be safe, and i think you'll have some capital return plays there. >> reporter: as more u.s. companies report earnings, investors will be scrutinizing the reports to get a greater sense of europe's impact. for now, the hope is healthy sales in the u.s. and emerging markets will offset weakness in europe. erika miller, "nightly business
report," new york. >> tom: three-quarters of the profits of our next guest's company come from overseas, and it's expecting double-digit earnings growth this year. david novak is the chairman and c.e.o. of yum brands, the company behind k.f.c., pizza hut and taco bell. david also is author of "taking people with you: the only way to make big things happen." he joins us tonight from the new york stock exchange. david, welcome to n. b. r., nice to see you. >> great to be with you. >> tom: profits from overseas, most of it from china. what about the business in europe specifically, how is that looking? >> we have very little exposure in europe, but our business is strong. we have a relatively small business particularly in france and germany, it really represents a lot of up side for us as we go forward, because in france, for example, we have the highest average lines and we're at the early stages of growth there, so we see lots of the unit development in both france and germany over the long term. but right now we have very
little exposure in western europe. the big driver of our growth is emerging markets, particularly china. we have 4,000 restaurants in china now, we're growing in india, we just made india a separate division. africa is a big market for us now. we have a big base in south africa, and we just added five new countries, we're strong in vietnam, indonesia. so the emerging markets are really the yum growth story, and what really sets us apart from most companies. >> tom: you get about half your profits from china, a quarter from the rest of the world, and a quarter from the u.s.. those u.s. profits have been a little under pressure due in mart to taco bell. what are you doing to combat the trend at taco bell? >> this year we sell operate our 50th anniversary at taco bell and we really reinvented the taco, we have some major innovation coming, we will be launching a nacho cheese taco shell which is absolutely delicious, and i think you'll
love it, tom, you gotta give it a try. >> tom: are you a to keep the price points to that place where you're looking at that youthful customer? >> we're keeping the value right where we've hit, we stand for number one for central you at taco bell, but innovation is something that really drives your business, particularly in the more tough economic times. so this is some of the biggest innovation we've had coming out of taco bell in a long time. >> tom: you write a lot about innovation and leadership in your new book, in fact corporate america obviously has been criticized for not playing a bigger leadership role in the economy, having record profits but not doing much hiring, having record earnings, but keeping a lot of cash on the sidelines. how do you ains that question of leadership in corporate america? >> i think leadership in corporate america is something that we can really be proud of. we've got a lot of great leaders doing a lot of great things. the thing that i make my primary focus is leadership. i've been teaching, taking people with you for 15 years in our company, if a leadership program that i
teach that really takes people -- teaches how to people, how to start and make it happen in the workplace. i always say show me a great business, i'll show you a great leader. so the companies that are developing great leaders will be end up with the best businesses. >> tom: our final 15 seconds, how do you assess the quality of political leadership in the united states? >> i think we have an opportunity to transcend beyond republicans and democrats and focus on what's right for america. i think the real challenge is to get leadership that takes people with them and gets our best people involved trying to solve some of the biggest problems we have and work together and have a plan to move us forward. i really think we need to start thinking in bigger terms, in terms of growth and step change results, and hold our leaders more accountable for it. >> tom: instead of 2% gdp growth, maybe 5%. david, we have to leave it there, david novak, chairman
and c.e.o. of yum brand. >> reporter: i'm diane eastabrook. still ahead, i'll tell you how ford hopes to get a younger, hipper buyer behind the wheel of the lincoln brand. >> tom: tax incentives could be coming to companies that in- source instead of out-source american jobs. president obama announced today he's drafting tax proposals to reward companies that hire american workers. companies that don't could lose tax incentives. the president said the nation's businesses have a financial and moral responsibility to make use of the american workforce. today, he challenged business leaders to do exactly that. >> i don't want america to be a nation that's primarily known for financial speculation and racking up debt, buying stuff from other nations. i want us to be known for making and selling products all over the world stamped with three proud words, made in america. and we can make that happen.
>> tom: the white house says $12 million in the president's 2013 budget proposal will go toward the in-sourcing initiative. there are signs the u.s. economy is growing more jobs. more jobs were added in december than in eight months previous. as darren gersh reports tonight, some companies can't hire fast enough. >> reporter: sure, the walls are white, the cubicles are grey, but this is some of the most exciting economic video we've seen in a long time. that's because the cubicles here at globalnet services are almost full, and the company has plans to add more workers. >> we can't hire fast enough. >> reporter: this is chuck kramer, v.p. for health systems at globalnet. and yes, he actually said it: >> we can't hire fast enough. >> reporter: globalnet has 32 open positions. demand is strong for the web site and google mapping services the company sells. a lot of the work this company does is with the federal government, but a lot isn't, and the outlook is good. >> what we're hearing from our partners and people that we work
with is the interest is there in hiring people. >> reporter: kramer says business is finally turning around. >> if i were a betting man-- and i am a betting man-- i'm very certain about it. we've seen the trends come over the last several months in the various economic reports, the reports from publicly-held companies, and they look fairly positive. we're confident in those numbers. >> reporter: confidence for employees, well, many of them are still shell shocked. after two new jobs and two layoffs, chris pasquerette is happy to be working, but his economic scars are still fresh. >> my confidence is not incredibly strong. i tend to feel that we didn't necessarily jump out of recession. it's not that we're entering recession; i tend to think that it was kind of here all along and that we're changing our expectations about what the job market entails. >> reporter: the national federation of independent business' optimism index shows small businesses like globalnet now expect the economy to pick
up this year, but most are still cautious about hiring. and despite the good news at globalnet, economist heidi shierholz says the national employment picture has been basically treading water. >> in a very real sense, we haven't started the jobs recovery yet. the hole hasn't gotten deeper, but we haven't started climbing out of it. >> reporter: so there is good news out there about the economy: firms are hiring, we just need a lot more of them. darren gersh, "nightly business report," washington. >> tom: one industry that has seen a few thousand new jobs added since the fall is the auto industry. one aging auto brand is getting a face lift: lincoln. it's been losing buyers over the last decade, but ford isn't giving up on it yet. at the north american international auto show this week, the company unveiled lincoln's makeover, including new products, upgraded dealerships and new marketing. but is it too little, too late for lincoln? diane eastabrook reports from detroit. ♪ >> reporter: at detroit's cobo hall, a six-piece orchestra performed, mimosas flowed and waiters made the rounds with
trays of hors d'oeuvres. a charity ball, perhaps? not quite. it was a prelude to the introduction of lincoln's mkz concept, a sleek sedan with a panoramic roof that's expected to hit showrooms this fall. the mkz is the first step in ford's reinvention of the lincoln brand. mark fields, president of ford north america, wants lincoln to be synonymous with luxury. >> we're looking at not only other automakers, but we're looking at nordstrom, ritz carlton, those kinds of brands, because that's where these luxury customers do their business today. >> reporter: the company has its work cut out for it. lincoln sales are down 35% from where they were just five years ago. the problem with lincoln isn't the quality of its products but it's stodgy image. analysts say the average lincoln owner is eligible for social security. >> reporter: younger, hipper, more affluent buyers have been gravitating to edgier imports
like mercedes benz, b.m.w. and audi, which earlier this week rolled out the q-3 crossover concept. industry watchers say lincoln is competing in perhaps the most cutthroat vehicle segment. >> conquesting in the luxury market is one of the toughest tasks for any manufacturer because it is so competitive, and it's really based on really consumers' buying image versus content or the metal. >> reporter: ford admits part of lincoln's image problem begins at its dealerships. many haven't had facelifts in years. field says the company will be helping dealers make upgrades, but most of the investment will be on employee training, not facilities. >> we know it's very competitive out there, and everything we do at lincoln-- every product, every service, every interaction that the consumer has with lincoln-- we want to make sure it's a positive one. >> reporter: ford is convinced there is still life in lincoln. the company plans to roll out
seven all new lincolns over the next few years, including the mkz. the trick now is convincing younger buyers a brand they think is old can still play a new tune. diane eastabrook, "nightly business report," detroit. >> tom: those buying cars-- lincolns and others-- are paying back their loans. auto loan repayments are one bright spot in a new report on which bills consumers are paying on time. mark green is c.e.o. of fico, the credit risk scoring firm: >> consumers are sort of focused on automobile purchases and the importance of paying off those obligations. that and credit cards have sort of moved higher in what people call the payment hierarchy and mortgages. mortgages tend to be something that people are willing to walk away from, but they're not walking away from car loans. >> tom: as for other types of loans, the survey predicts student loans and mortgage delinquencies both may increase this year. just one day after orange juice futures hit a four-year high, imported orange juice shipments have been put on hold. the food and drug administration is implementing a "test and
hold" policy, halting all o.j. imports to test for a fungicide found recently in oranges from brazil. the agency says if its contaminated, the imported juice will be destroyed. the agency also is screening juice that's already on store shelves. o.j. futures fell about 10% despite the halt on imports. overall, stocks were able to cling to most of their recent gains thanks to a small late session rally. here's tonight's "market focus." we saw muted market moves today. the broad market was able to squeak into positive territory in the final half hour. it was enough to push the index up to its highest close since the late summer sell-off, coming ahead of an interest rate decision by the european central bank tomorrow. leading the market: materials and financial sectors, each up 1%. telecom stocks, as a group, also saw gains. u.s. steel was the best materials stock, rising almost 5%. this is u.s. steel's highest close since september.
inside the financial sector, insurer genworth led the way, up more than 7% to a five-month high. genworth is involved in all different types of insurance, including mortgage insurance. and with today's positive news surrounding the third largest homebuilder in the u.s., several housing-related sectors were moving up. it wasn't so much the earnings of lennar, but rather sales orders. here are the earnings, a penny less than estimates. but the number of orders for new homes jumped 20%. that's the third straight quarter of growth. lennar shares rocketed higher, rallying to a new 52-week high. the builder says rising rental rates, low home prices and low mortgage rates are driving home buyers. that was enough to get the sector jumping. pulte and d.r. horton were up almost 5% each. ryland group added 3.5%. energy stocks were the drag on the market, with natural gas, oil and heating oil futures
falling. chevron was down more than 1%. shares dropped another 2% after the closing bell. the company warned of fourth quarter results "significantly" below third quarter numbers. among the issues: lower margins. the biggest losers in the energy sector today was this trio: cabot, southwestern and range resources. investment firm baird equity cut price targets and ratings on several oil and natural gas explorers, pointing to uncertainty over energy prices. speaking of energy, some renewable energy stocks were shining bright. an analyst at deustche bank found strong fourth-quarter demand has dwindled inventories to record low levels. jinko-solar, trina solar and suntech all trade below $10 per share, but they rallied by at least 27% each today. last year, this sector was hit hard as solar panel prices collapsed, cutting profit margins for the manufacturers. and that's tonight's "market focus."
>> tom: it is a tug of war over outlooks. the s&p 500 is at its highest level since july suggesting earnings optimism. government bond interest rates are nearing their lows of last fall, suggesting economic pessimism. tonight's "street critique" guest says investors need to watch profits, not politicians. he's michael farr, author of the arrogance cycle. always great to see you
michael. happy new year. >> thanks, great to be with you, happy new year to you. >> tom: a strange con verge ends, both stocks and bonds rallying. what can we take away from that? >> well, a little optimism, a little bit of fear, i think. when you consider everything going on around the world, the u.s. still seems to be a pretty good safe haven, but i think with sources of government money coming still into the markets from around the world, there are 40 elections around the world this year, which means that those governments are probably going to be throwing some money at things, making sure everybody is happy during the election period. probably not a good idea for long-term economics, but will work for the stock market near term. >> tom: with that kind of environment you like dannaher, dhr. what do you expect out of this one this year? >> i think this is a global company, and market has good demand, reasonable valuations, i think this could be a 10% stock this year, 15 times this year's estimates, and i think this stock is growing 15, 16,
17% this year. good acquisitions, very solid management team. i'm crossing my fingers with danaher, but it makes sense to me. >> tom: we've got a viewer question we want to put to you, comes to us from tony. he writes in, i currently hold 10,000 shares of al ko, a i'm debating if i should buy another 10,000, double a the ticker symbol on alcoa, talked about how china is where the alcoa market and aluminum market is going to be told next year. what do you think about alcoa? >> i'd be cautious actually. i like the price, and you certainly want to buy when people are fearful, but i'd be patient with alcoa. we've seen that the energy stocks had a tough time today, we know that china is concerned about their growth and more leaning towards easing. so as things slow there i think we're seeing some of that evidence in alcoa. you still got a burst on the kmidity side, but i'd be a little cautious. >> tom: fair enough. in october you had a tree -- trio of stocks we want to
update. those are up 5% and 1%, and you also liked technology, quality com up 8%. nice moves. >> they worked pretty well. yes, i would put new money to work in those names where i don't own them. i've always cautious after a stock has gone up a lot, but yes i would, and i own all those stocks. where i don't own them, i'd buy them. there were we go, and the disclosurees to boot. you can e-mail us your questions at nbr.com. our guest this evening: michael farr, author of "the arrogance cycle." here's what we're watching for tomorrow. the latest numbers on new weekly jobless benefits are due out. economists are predicting another week of claims below 400,000, signaling continued improvement in the labor market. tomorrow, the european central bank meets for the first time this year amid that continent's growing financial crisis.
>> tom: hostess brands has filed for bankruptcy again. the maker of twinkies, ding dongs and wonder bread hopes to restructure nearly $1.5 billion in debt and renegotiate its labor contracts while in chapter 11 protection. if you're a fan, hostess will keep baking the snack cakes. the company emerged from bankruptcy just two years ago under its former name, interstate bakeries. a government watchdog says the taxman's budget is too small and his workload too great. the national taxpayer advocate says those conditions are making it tough for the internal revenue service to handle identity theft cases and fight fraud. the advocate would like to see the i.r.s.' $12 billion budget increased. the agency's workload jumped 20% last year to more than 226,000 cases, and the number of returns requiring a second look climbed 72% to over a million.
>> tom: for the job market to continue improving, new companies will continue to have to be launched. many new jobs come from new companies, but when it comes to launching a business, being an entrepreneur is not for wimps. in tonight's "money file," eric schurenberg asks: do you have what it takes to succeed as an entrepreneur? eric is editor at inc.com.
>> what's the first question a v.c. or angel investor asks a would-be entrepreneur? it's not, "what's your business model, or how big is your market?" it's "who the heck are you?" why? because entrepreneurship is so hard. to launch a company, you have to be willing to sacrifice your family and friends, all your other interests, not to mention sleep, peace of mind and health. but "who are you" also gets to your business credibility. it helps if you have experience in your startup's industry. if you're young, you may not have any. in that case, you need to be a quick study. in next to no time, you have to learn enough about your chosen industry to convince someone it's not foolish to put money on your head. and then there's your team. it's not only a question of how qualified they are, but also of how well you all fit. how long have you been together? do your skills mesh, and do you get along? because, in the course of getting going, you'll put your team through stresses you've never imagined. yes, you need a great business model, as well, but models change in the evolution of a
company, the founder doesn't. that's why investors all say the same thing: they fund people, not models. so, question number one is, do you have what it takes? i'm eric schurenberg. >> tom: and finally, every january brings a lot of talk on wall street about year-end bonuses. usually, those bonus checks are handed out in february, and next month wall street bonuses are expected to be at their lowest level since the financial crisis started in 2008. in a year that saw protests over banks, we asked those lunching near wall street what they thought. >> i think it's been too much corruption and greed. >> if profit is not there, the bonuses will be down. >> i think they should cut even more. >> they definitely semen titled to what i don't think was ever theirs. >> today if everyone spending the summers in the hamptons and skiing, you know, in veil, that might be over. you have a good job you should be grateful for it. >> if you work hard, the
agreement is that you're going to get a bonus, then you should be entitled to it. >> tom: we want to hear what you have to say about wall street bonuses. drop us a line on facebook at bizrpt. that's "nightly business report" for wednesday, january 11. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org